﻿<p>
  This model was proposed in 1993 by <strong>Eugene Fama</strong> and <strong>Kenneth French</strong> to describe stock returns. The 3-factor model is
</p>
\[ R = \alpha + \beta_m MKT + \beta_s SMB + \beta_h HML \]

<p>
  where
</p>
<ul>
    <li>MKT is the excess return of the market. It's the value-weighted return of all CRSP firms incorporated in the US and listed on the NYSE, AMEX, or NASDAQ minus the 1-month Treasury Bill rate.</li>
    <li>SMB (Small Minus Big) measures the excess return of stocks with small market cap over those with larger market cap.</li>
    <li>HML (High Minus Low) measures the excess return of value stocks over growth stocks. Value stocks have a higher book to price ratio (B/P) than growth stocks.</li>
</ul>

<p>
  Data on these factors can be downloaded from <a href="http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/Data_Library/f-f_factors.html" target="_blank">French's website</a>.
</p>
